Last updated: October 22, 2026.
Labor dispatch is a regulated employment structure in China; EOR is a service description whose legal implementation must be examined. The two can overlap. Compare the actual employer, worker management, licenses, role restrictions and liability before choosing a label.
This guide compares labor dispatch, EOR services, administrative PEO support and genuine business outsourcing. An employment provider does not itself authorize the client’s sales, invoicing, licensed activities or foreign-employee work authorization.
What Is Labor Dispatch in China?
Labor dispatch, also called worker dispatch, is an arrangement in which a licensed agency employs the worker and assigns them to a user entity that directs the work. The agency remains the legal employer, while the user entity has statutory workplace and pay-related duties. Read the labor dispatch definition alongside the actual contract and management arrangements.
China treats dispatch as supplementary rather than a general substitute for direct employment. The ordinary rules and the express representative-office exceptions are set out below.
Labor Dispatch Rules in China: 10% Cap, Temporary Roles and Equal Pay
| Rule | Requirement | Legal basis |
|---|---|---|
| Permitted roles | Ordinarily temporary, auxiliary or substitute positions. Temporary means the position exists for no more than six months, not that every dispatch contract is limited to six months. Auxiliary roles require the prescribed employee discussion/consultation and internal publication process. | Labor Contract Law Article 66; Interim Provisions Article 3 |
| 10% usage cap | Dispatched workers must ordinarily be no more than 10% of total workforce: directly contracted employees plus dispatched workers. Example: 90 direct + 10 dispatched = 10%; 90 direct + 11 dispatched exceeds 10%. | Interim Provisions Article 4 |
| Equal pay and treatment | Dispatched workers have equal-pay-for-equal-work rights; apply the same remuneration-distribution method for comparable roles and relevant workplace benefits. It is not permission to substitute a cheaper pay scale merely because a worker is dispatched. | Labor Contract Law Articles 62–63; Interim Provisions Articles 7 and 9 |
| Joint liability | Where a dispatch agency or user entity violates the rules, causing harm to a dispatched worker, the dispatch agency and user entity bear joint compensation liability under the applicable statutory provision. This is not a claim that every commercial dispute automatically creates joint liability. | Labor Contract Law Article 92; Interim Provisions Article 20 |
| Dispatch license | Operating labor dispatch requires the applicable labor-dispatch business license. A generic company registration or human-resources service qualification alone does not establish dispatch authorization. | Labor Contract Law Article 57; labor-dispatch licensing measures |
| Agency labor contract | The agency must conclude a written fixed-term employment contract of at least two years and meet its employer obligations; the temporary-position rule does not shorten this minimum contract requirement. | Labor Contract Law Article 58; Interim Provisions Article 5 |
| Express exceptions | Foreign enterprise and foreign financial institution representative offices using dispatched workers, and specified international seafarer arrangements, are exempt from the three-role and usage-ratio limits under Article 25. This does not remove all other employment obligations. | Interim Provisions Article 25 |
Sources: Labor Contract Law, MOHRSS Interim Provisions on Labor Dispatch (2014) and labor-dispatch licensing measures. Confirm the actual user entity and any express exception before applying a cap.
What Is an Employer of Record (EOR)?
An EOR service coordinates local employment for a client: contracts, payroll, statutory contributions and employee administration. Identify the actual China employing entity and the legal structure behind the service. The commercial term “EOR” is not a separate statutory exemption from labor dispatch or other rules.
For the broader process, see China EOR guide.
How a China EOR Legally Employs Staff
A provider’s China entity may sign an employment contract directly with the worker. That identifies the contractual employer, but does not by itself decide whether the broader assignment to and management by a client amounts to labor dispatch. A licensed dispatch entity is another implementation route; its structure and applicable restrictions must be assessed.
Ask who signs and pays, which entity directs the worker, who bears workplace duties, and what service the provider actually delivers. If the substance is labor dispatch, apply its licensing, role, ratio, pay and liability requirements, subject to express exceptions. Interim Provisions Article 27 applies dispatch rules where workers are in substance used as dispatched labor under contracting or outsourcing labels.
Do not describe “direct signature by the provider” as an automatic safe harbor or promise an unlicensed foreign client unrestricted user-entity status. Review the client’s status and planned activities and obtain a case-specific legal assessment of the actual arrangement.
Labor Dispatch vs. Employer of Record: Key Differences
| Factor | Labor dispatch | EOR service | Administrative PEO support | Genuine business outsourcing |
|---|---|---|---|---|
| Legal employer | Licensed dispatch agency. | The named local employing entity; implementation may involve dispatch rules. China EOR service. | Client’s existing China entity remains employer. | Supplier employs and manages its own staff to deliver the contracted service. |
| License / qualifications | Labor-dispatch business license required. | Check actual activities and required licenses; the EOR name provides no exemption. | Check relevant service qualifications; client must be a lawful employer. | Required qualifications depend on the service; substance must be genuine outsourced delivery. |
| Role limits | Ordinary three-role limits, with Article 25 exceptions. | Dispatch limits apply if the arrangement is substantively dispatch; assess exceptions. | Client’s direct employment follows ordinary employment rules. | Not a dispatch exemption if staff are actually managed as dispatched workers. |
| Usage ratio | Ordinarily no more than 10% of direct + dispatched headcount; express exceptions apply. | No separate universal EOR cap; apply actual legal structure’s requirements. | No dispatch ratio solely from outsourcing HR administration. | No dispatch ratio for genuine services solely because a supplier uses staff; Article 27 prevents relabeling. |
| Pay and benefits | Equal-pay rights and agency/user statutory duties. | Applicable employment and any dispatch equal-pay duties remain. | Client funds and owes employee pay/benefits; provider administers agreed functions. | Supplier’s employment obligations remain; commercial pricing does not override worker rights. |
| Responsibility / liability | Agency employer duties and user-entity duties; statutory joint compensation liability for harmful violations. | Depends on structure, actual conduct and applicable law; service agreement cannot remove worker rights. | Client remains employer; contractual provider remedies are separate. | Supplier responsible for its workers; reclassification or unlawful arrangements can change liabilities. |
Legal and Compliance Differences Between Labor Dispatch and EOR
Review the Labor Contract Law Articles 57–67 and 92 and 2014 Interim Provisions before selecting the contract form. Dispatch agencies have employer duties; user entities also owe prescribed pay, working-time, safety and other obligations. Allocating commercial costs in a service agreement does not erase statutory employee claims.
Check the agency license and scope, the real user entity, role classification and headcount calculation, equal-pay method, local contributions, worker return/exit procedures and evidence. For EOR, first identify whether those dispatch rules apply to the actual implementation; see EOR risks in China.
When Is Labor Dispatch Appropriate?
Consider dispatch only where the actual user entity, agency license, position and ratio satisfy the applicable rules, including any express exception. A temporary staffing need may qualify, but ordinary permanent core staffing cannot be treated as auxiliary merely to avoid direct-employment requirements.
FESCO/CIIC and representative offices
FESCO and CIIC are familiar service-provider names; the brand name alone is not evidence that a particular contracting entity holds the required qualifications. Check the entity, license, location and authorized staffing scope.
Representative-office employment has specific rules. For example, Beijing’s published rules require foreign enterprise representative offices to recruit Chinese employees through approved foreign-affairs service units, which sign labor contracts and pay social insurance. Confirm the current local implementation and the provider’s authorization before choosing an entity; the Beijing document is not a nationwide approval checklist.
Interim Provisions Article 25 exempts the specified representative offices from the ordinary three-role and dispatch-ratio limits. Do not tell such an office it necessarily violates the 10% cap merely because all its China staff are dispatched. Other applicable worker protections and the representative office’s business-activity restrictions remain. Read representative office staffing and the Beijing representative-office staffing rules.
When Is an Employer of Record the Better Choice?
An EOR service may suit a permitted staffing plan where the client needs local employment administration without its own employing entity. It is appropriate only after the actual employment/user structure, qualifications, work locations and intended activities are assessed. A long-term project or the lack of a local entity is not in itself an exemption from dispatch, business-registration, tax or immigration requirements.
Comparing Employer Responsibilities
Separate the worker’s labor contract from the client’s service agreement. The legal employer handles its statutory employer obligations; the entity directing work must also satisfy any applicable user-entity duties. The client provides accurate role, pay, attendance and performance inputs and coordinates decisions through the lawful employer process. Verify actual contract funding and decision rights rather than assuming every provider uses the same terms.
Cost Considerations
Dispatch budgeting must reflect equal pay for equal work, comparable remuneration arrangements, statutory benefits and the respective agency/user obligations. A lower quoted agency fee does not justify reducing the worker’s lawful pay or shifting employer contributions to the worker.
For an EOR arrangement, budget salary, employer social insurance and housing fund, actual service fees, payroll funding and any agreed deposits or exit costs separately. Read China EOR cost and obtain a dated scope-specific quote. Neither model removes statutory severance or other employment liabilities merely by changing the contract label.
Which Hiring Model Is Right for Your Business?
Start with the actual employer and user entity, the work and management structure, licensing and any representative-office status. Then compare headcount, city coverage, payroll needs, timing and total cost. Choose a lawful structure before optimizing price.
Compare EOR vs PEO vs AOR vs HRO in China if the need is broader than dispatch. Administrative PEO support assumes your own China employer; genuine independent services and business outsourcing require their own substantive assessments.
Common Mistakes Foreign Companies Make When Choosing Between Labor Dispatch and EOR
International companies often assume that Labor Dispatch and Employer of Record (EOR) services are interchangeable because both involve a third party acting as the legal employer. In reality, each model serves a different purpose and is governed by different legal and operational considerations.
Some of the most common mistakes include:
- Using Labor Dispatch for long-term positions that form part of the company’s core business.
- Selecting a hiring model based solely on cost without considering compliance obligations.
- Assuming Labor Dispatch is the simplest way to enter the Chinese market.
- Overlooking payroll administration, statutory benefits, and ongoing employment compliance.
- Failing to plan for future expansion when choosing an employment model.
These decisions can increase administrative complexity and may require businesses to restructure their employment arrangements as they grow.
Payroll and HR Administration Considerations
Beyond employment contracts, businesses hiring in China must also manage payroll processing, statutory social insurance, individual income tax (IIT), Housing Provident Fund contributions, leave administration, and employee records.
Whether a company uses Labor Dispatch or an Employer of Record, payroll administration remains an essential part of employment compliance. Employers should ensure salaries, statutory deductions, and government filings are completed accurately and on time.
Companies that establish their own legal entity often choose to outsource payroll administration to reduce administrative workloads and maintain compliance with changing local regulations.
Learn more about HROne’s China Payroll Outsourcing services and how they support compliant payroll management for businesses operating in China.
Need Help Choosing the Right Hiring Model?
HROne can help scope the employment-administration process around the proposed role, city, employer and client activities. Confirm the actual employing entity, applicable qualifications, payroll and contribution process, and documented responsibilities before onboarding.
Frequently Asked Questions
What is the difference between Labor Dispatch and an Employer of Record (EOR) in China?
Labor dispatch is a regulated agency-employer/user-entity arrangement. EOR describes an employment service whose actual implementation may be labor dispatch. Assess the legal employer, user entity, control and licenses rather than assuming they are completely independent legal frameworks.
Can foreign companies use an Employer of Record instead of setting up a company in China?
An eligible arrangement may support local employment without the client establishing its own employing entity, but the actual employer, user structure, licenses and intended activities must be reviewed. This does not automatically authorize local sales, invoicing, regulated operations or foreign-employee work permits.
Who is responsible for payroll under an Employer of Record?
The Employer of Record manages payroll processing, statutory social insurance contributions, Housing Provident Fund administration, individual income tax withholding, and employment compliance. The client company remains responsible for directing the employee’s daily work and business objectives.
Does an Employer of Record handle social insurance and employee benefits?
Yes. An Employer of Record generally administers statutory social insurance contributions, employee benefits required by law, tax withholding, and payroll reporting as part of its employment services.
Can companies hire employees across multiple Chinese cities using an Employer of Record?
Yes. Many Employer of Record providers support hiring across multiple Chinese cities while managing local payroll administration and employment compliance according to each jurisdiction’s requirements.
Is Labor Dispatch suitable for long-term hiring?
The temporary-role limit is six months, but auxiliary and substitute roles have different definitions, and specified representative offices have an express exception. A dispatch agency’s written labor contract must ordinarily be for at least two years. A long-term assignment still needs assessment of its lawful role and structure; an EOR label does not remove applicable limits.
Can companies transition from an Employer of Record to their own legal entity?
Yes. Many businesses initially use an Employer of Record to enter the Chinese market quickly and later transfer employees to their own local entity after incorporation, subject to applicable employment requirements.
How does payroll outsourcing differ from an Employer of Record?
Payroll outsourcing is designed for companies that already have a legal entity in China and need assistance managing payroll administration. An Employer of Record is intended for companies that do not yet have a local entity and require a compliant employment solution in addition to payroll management.
What is the 10% rule for labor dispatch in China?
Ordinarily the number of dispatched workers cannot exceed 10% of the user entity’s directly contracted employees plus dispatched workers. Interim Provisions Article 25 exempts specified representative offices and other stated arrangements from this ratio and the three-role limits. Confirm the actual user entity and exception before calculating.
Is a China EOR the same as labor dispatch?
Not as a matter of terminology: EOR is a service label and labor dispatch is a regulated legal structure. Some EOR implementations may be substantively labor dispatch. Direct signature by a provider or an outsourcing label does not itself exempt the arrangement from applicable dispatch rules.
